Depression and anxiety are often seen as pathological emotional states, without adaptive value. Although they may become pathological, for the normal person these emotions may be essential control processes, guides for directing thought and behavior. Understanding the distortions of judgment caused by anxiety and depression may first require understanding the adaptive process through which emotional responses to life events regulate the cognitive appraisal of those events. Emotions may influence multiple levels of neural organization, including elementary brainstem arousal mechanisms, limbic representations of threat and pleasure, and differential hemispheric contributions to cognitive representation. In the initial studies of our research project, subjects who adopted an optimistic emotional mood showed a pattern of brain electrical activity indicating a priming or facilitation of the perception of favorable outcomes as they read brief stories of daily life events. Subjects adopting a pessimistic mood showed a brain electrical pattern reflecting their expectation of unfavorable outcomes to the stories. These results suggest that a person's current mood state primes mood-congruent domains of expectation. The proposed research (1) replicates this mood induction study with improved, high-density arrays (64- and 128-channels) of scalp electrodes, (2) introduces improved signal analysis methods for assessing the time course and scalp topography of the brain electrical activity, (3) applies the new methods to examine the cognitive influences of the naturalistic mood states of subjects experiencing clinically significant depression and anxiety, and (4) extends the analysis to examine emotional influences on the process of self-evaluation.